Fund flows have been relatively light this week for the most part in ETF land in terms of creation/redemption activity in notional dollars.
However, we did take notice of some substantial liquidations that have been taking place in several prominent U.S. High Yield Corporate Bond ETFs, notably HYG (iShares High Yield Corporate Bond, Expense Ratio 0.50%) and JNK (SPDR Barclays High Yield Bond, Expense Ratio 0.40%).
These two ETFs actually lead all U.S. listed ETPs in the short term in redemption flows, with HYG seeing >$1 billion spill out lately and JNK seeing about $770 million leave the product. Interestingly, both products are trading off of their mid-May highs and trading volume has been above average for at least the past week and a half here, and it is clear there is selling pressure as the ETFs cling to support just above their 200 day MA’s.
Generally these High Yield Corporate Bond products are helpful to watch in terms of being potential barometers of “risk on” or “risk off” sentiment in the marketplace, which makes sense because as investors feel more comfortable about market stability and direction, they typically may tend to chase High Yield Corporate Bonds higher (at lower yields), just to earn some kind of competitive yield in their portfolios.
Interestingly, Treasury Bonds as evidenced in TLT (iShares 20+ Year Treasury Bond, Expense Ratio 0.15%) has been clobbered all week long with the exception of a bounce yesterday and today in the early going. Of course with plunging Treasury Bond prices, yields have risen there, and we see TLT’s current yield at 2.70%, as compared to a yield of 5.37% for HYG and 5.77% for JNK.